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Small and medium-sized enterprises (SMEs)

Recruiting a first employee

Handshake

The majority of European businesses are "one-person-enterprises" (OPEs), i.e. businesses that do not employee regular staff. The OPEs account for 8% of employment and almost 4% of the population in Europe. Red tape and costs are a major disincentive for entrepreneurs to take on extra help. If recruiting a first employee was just made simpler, the Commission estimates that up to a million new jobs would be created.

Why OPEs do not recruit

According to a Flash Eurobarometer survey conducted in the Summer and Autumn of 2004 among 4,000 one-person-enterprises in 19 European countries 11% of the one-person-enterprises do not recruit because of the administrative burden that comes with employing staff such as the withholding of wage taxes and social contributions, regular reporting duties, obligations regarding health and safety regulations etc. 36% of the companies do not hire staff because they cannot afford the non wage labour costs (especially employer's social security contributions) and 27% had problems finding a suitable employee or found it too costly to train new personnel.

The Flash Eurobarometer survey also indicated that many small companies are not well informed regarding the obligations that they would have if they become employers. Nevertheless more than half of the enterprises found administrative rules and obligations unsuited and an obstacle to employment.

What can be done?

In 2004 and 2005 a group of national experts from Member States analysed the issue further. The experts identified numerous quantitative indicators that help to understand the situation of one-person-enterprises better and allow comparisons between European countries. The experts also identified some cases of good administrative practices which alleviate the administrative burden on companies and which could be interesting for all Member States. Finally, the group put forward several recommendations as to how the recruiting of staff could be made easier for small companies. In particular the group proposed:

  • Mandatory administrative contacts for a recruitment should be reduced (ideally one-stop-shops);
  • Administrative procedures for recruitments should be reduced and simplified;
  • Employers' administrative obligations have to be communicated in a comprehensive and clear way.

First employee: Final report of the expert groupPDF [697KB] danskDeutscheestiελληνικάespañolfrançaisitalianolatviešulietuviųmagyarMaltiNederlandspolskiportuguêsslovenčinaslovenščinasuomisvenska

Limited Progress

In the context of the annual reporting under the Lisbon Process for Jobs and Growth the information on the necessary procedures for the recruitment of the first employee have been collected. It appears that some limited progress has been made in the simplification of procedures: overall, the average number of mandatory external contacts (social security organisations, tax offices, labour offices, etc.) has been reduced from 3 to 2½ and the average number of procedures (filing forms, etc.) from 3½ to 3. However, the target of having no more than one public administration point in that process is still far off and the situation varies significantly from a Member State to another.

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